Comments on Michelle Grattan "Turnbull points to problems in raising GST", 5/02/2016
It is strange for the PM to argue that payroll tax is efficient and at the same time also argue that company tax rate should be reduced. The two arguments are contradictory. It appears that the PM has been ill advised or not been advised but he only talk out of his own intuitive feel.
Comparing payroll tax with company income tax, the only difference is the degree of the impact on business, with payroll having a greater impact on business. That is because when without payroll tax, that amount would be profit and business pay income tax on that amount as opposed to pay the full amount when payroll tax is imposed.
It would be better if significant tax reforms or increasing taxes be put out much earlier in an election cycle, so it give plenty and adequate time to the public to consider them and make their mind on whether they would support or not support them.Leaving significant reform policy proposal to the last minute does not show enough respect to the voters!
Showing posts with label GST. Show all posts
Showing posts with label GST. Show all posts
2015-07-30
How should Australia's GST compare with OECD average?
Comments on ABC Fact Check "Do Australians pay less GST than people in other OECD nations?" 30/07/2015
The comparison of GST with other OECD countries' GST or VAT, in this fact check, while apparently correct, masks the size effect of the different OECD countries and that makes a quite difference in its conclusion.
For example, the four countries which have a lower ratio of GST/VAT revenue to GDP include two of the OECD largest economies, namely the USA and Japan, as well as another G7 countries, that is Canada.
If the different sizes of the OECD economies is taken into account, then a different picture emerges and Australia does not fair too badly as the nominal comparison suggested. Australia could sit much closer to the average GST/VAT GDP ratio weighted by GDP.
So, this is an important point that the fact check should at least mention or better still discuss it.
From the second Chart in ABC Fact Check we can see that the ratio of GST/VAT to GDP is less than 5% for the US, and less than 6% for Japan, while it was stated by the ABC Fact Check that Australia's is 7/5%.
The comparison of GST with other OECD countries' GST or VAT, in this fact check, while apparently correct, masks the size effect of the different OECD countries and that makes a quite difference in its conclusion.
For example, the four countries which have a lower ratio of GST/VAT revenue to GDP include two of the OECD largest economies, namely the USA and Japan, as well as another G7 countries, that is Canada.
If the different sizes of the OECD economies is taken into account, then a different picture emerges and Australia does not fair too badly as the nominal comparison suggested. Australia could sit much closer to the average GST/VAT GDP ratio weighted by GDP.
So, this is an important point that the fact check should at least mention or better still discuss it.
From the second Chart in ABC Fact Check we can see that the ratio of GST/VAT to GDP is less than 5% for the US, and less than 6% for Japan, while it was stated by the ABC Fact Check that Australia's is 7/5%.
2015-07-24
An Economics professor's serious mistake
Comments on Flavio Menezes "FactCheck: is the GST as efficient but less equitable than income tax?" 24/07/2015
This "Fact Check" from Flavio Menezes is so extraordinarily wrong that it does not pass the common sense or insanity text. The first sentence in its verdict , that is I quote "The Assistant Shadow Treasurer is correct that the efficiency of the GST as a tax is similar to that of income tax", is spectacularly incorrect and wrong.
That verdict even blatantly contradicts or ignores or misunderstands the review provided by Professor John Freebairn that the so called Fact Check was presumably engaged as an expert opinion. It is a serious and appalling error or error in judgement, understanding, or simply oversight or negligence on Flavio Menezes' part. How did that happen Flavio Menezes, a Professor of Economics at The University of Queensland, is beyond comprehension.
In terms of efficiency, the GST, which is a flat with a rate of 10% as currently applied even though there are exemptions such as fresh food, health etc, is much more efficient than the Australian income tax which is very progressive in the tax rates ranging from 0 to effectively 47% if the medicare levy is included. There is virtually no argument about the relative efficiency among economists and most politicians know that also.
In terms of distributional effect, the progressive nature of the income tax is much more favourable to low income people because they are taxed proportionately at lower rates and tax the high income people much more heavily.
PS: Of course, in order to derive his erroneous conclusion, Professor Flavio Menezes used a flat income tax. We all know that is purely an assumption and is far from what the very progressive Australian income tax system is.
This "Fact Check" from Flavio Menezes is so extraordinarily wrong that it does not pass the common sense or insanity text. The first sentence in its verdict , that is I quote "The Assistant Shadow Treasurer is correct that the efficiency of the GST as a tax is similar to that of income tax", is spectacularly incorrect and wrong.
That verdict even blatantly contradicts or ignores or misunderstands the review provided by Professor John Freebairn that the so called Fact Check was presumably engaged as an expert opinion. It is a serious and appalling error or error in judgement, understanding, or simply oversight or negligence on Flavio Menezes' part. How did that happen Flavio Menezes, a Professor of Economics at The University of Queensland, is beyond comprehension.
In terms of efficiency, the GST, which is a flat with a rate of 10% as currently applied even though there are exemptions such as fresh food, health etc, is much more efficient than the Australian income tax which is very progressive in the tax rates ranging from 0 to effectively 47% if the medicare levy is included. There is virtually no argument about the relative efficiency among economists and most politicians know that also.
In terms of distributional effect, the progressive nature of the income tax is much more favourable to low income people because they are taxed proportionately at lower rates and tax the high income people much more heavily.
PS: Of course, in order to derive his erroneous conclusion, Professor Flavio Menezes used a flat income tax. We all know that is purely an assumption and is far from what the very progressive Australian income tax system is.
2015-07-22
Increasing GST is indeed a fanciful fix for strained budgets
Comments on Ross Gittins "Increasing GST a fanciful fix for strained budgets", 22/07/2015
And more than what you have already put very nicely is that why the politicians aren't talking about spending restraint at all. Why don't they review the necessity of the ever increasing share of spending on health, is that really the case that each and every dollar spent on health is that important and there is no waste in all that very big and increasing rapidly spending on health? Why don't they consider making the spending more effective and reducing waste and changing people's demand behaviour so the nation as a whole can use less and do more effectively?
All that suggests that the politicians are very lazy and not accountable to the trust that the electorate provided to them. All they do is to use health spending as an excuse to increase taxes. I would suggest that we should have a measure or mechanism that punishes higher taxing politicians.
Perhaps some international comparison would be helpful, but it seems hardly we hear any such discussions..
And more than what you have already put very nicely is that why the politicians aren't talking about spending restraint at all. Why don't they review the necessity of the ever increasing share of spending on health, is that really the case that each and every dollar spent on health is that important and there is no waste in all that very big and increasing rapidly spending on health? Why don't they consider making the spending more effective and reducing waste and changing people's demand behaviour so the nation as a whole can use less and do more effectively?
All that suggests that the politicians are very lazy and not accountable to the trust that the electorate provided to them. All they do is to use health spending as an excuse to increase taxes. I would suggest that we should have a measure or mechanism that punishes higher taxing politicians.
Perhaps some international comparison would be helpful, but it seems hardly we hear any such discussions..
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